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1. r= 8%
m= 2
The rate with continuous compounding is 7.84%
2. FV = $1,200
PV = $1,000
m = 2
With semi-annual compounding the return is R where
1000 *(1+ R/2)^2 = 1200
R= 19.09%
3. r = 12%
The rate of interest is R where R
e^R = (1+.12/12)^12
R= 11.94%
4. r = 9%
m = 4
The equivalent rate of interest with quarterly compounding is R where
e^.09 = (1+R/4)^4
or R = 0.09102
The amount of interest paid each quarter is therefore;
$227.55
a. Covariance = 0.178396
b. Correlation coefficient = 0.97821897
c. Standard deviation of spot price = 0.46832681
d. Standard deviation of futures price = 0.48675456
e. Minimum variance hedge ratio = 0.94118516 1.01671
8 Mean 9%
Standard deviation = 3.50%
Y = (X - u)/Stdev = 0.857143
Y > .857143 = 0.1956829692 The probability of the price rising more than
12% is 0.19568297
9 Amount of dividend = $1
Price = $35.75
Rate = 10%
Time of earned dividends 3 6 9 12
0.97531 0.95122942 0.9277435 0.904837
F2 = 13.80%
F3 = 18.80%
F4 = 19.40%
F5 = 27.00%
13 N= 17 (8 years + 6 months)
FV = 100
Coupon rate = 8%
Coupon payment = 4
YTM = 6%
P/Y = 2 Semi-annual payments
a. PV = $113.17
CF = 1.13166
b. N= 24
Coupon rate = 6.75%
Coupon payment = $3.38
PV = $106.35
CF = 1.06351
Bond futures contract = 119.75
c. 120.4688 135.5164 -15.0477 CTD
113.5313 127.3551 -13.8239
15 N= 5 FV = $100.00
Yield = 11%
r= 8%
Pmt = $8.00
1 2 3 4 5
7.166673 6.4201503837 5.75139 5.15229137 62.31058
a. Price = $86.80